This was a claim made by the Federal State Budgetary Institution Morspassluzhba (the salvor) against Palmali LLC, the owner of the General Azi Aslanov, for a salvage reward.

On 24 October 2020, the salvor received the information that the second tank of the General Azi Aslanov had blown. The vessel was de-energised and drifting. The hull was damaged. There were residual oil products in the cargo tanks. The vessel posed a serious threat to shipping. On 25 October 2020, the salvor and owner concluded an LOF 2020 with SCOPIC clause. The vessel was towed to the Port of Kerch and transferred to the port tugs nominated by the owner on 27 October 2020. That was the completion of the salvage operation.

On 26 October 2020, the salvor and owner entered into an agreement under which the price of the services rendered was USD 500,000. This sum was calculated as 20% of the salved value of the vessel (USD 2,500,000). The salved value was determined by independent assessors employed by the salvor. On 27 October 2020, the salvor provided the owner with scanned copies of the memorandum of works performed and payment documents. On 29 October 2020, the salvor sent the owner an invoice to pay the debt.

The Court of first instance found in favour of the salvor in full. The Commercial Court of Appeal upheld the judgment of the Court of first instance. The owner submitted a cassation appeal to the Commercial Court of the North-Caucasus District.

Held: The judgments of the Court of first instance and the Court of Appeal are revised. The claim is to be reconsidered by the Court of first instance.

The Court emphasised that under art 1 of the Salvage Convention 1989, salvage operation means 'any act or activity undertaken to assist a vessel or any other property in danger in navigable waters or in any other waters whatsoever'. The same definition is provided by art 337(2)(1) of the Merchant Shipping Code of the Russian Federation (the MSC RF).

Article 12.1 of the Salvage Convention 1989 stipulates that salvage operations which have a useful result give the right to a reward. Article 341 of the MSC RF is derived from this provision.

The Court stated that under the international approach, which is reflected in art 349 of the MSC RF, only services rendered against the express and reasonable prohibition by the owners of the ship in distress, or its master, or the owners of the property in danger, do not give rise to the right to salvage reward. The conclusion of a written salvage agreement is not the only ground for the payment of a salvage reward (art 338 of the MSC RF). The right to receive a reward and the obligation to pay do not depend on the fact that the services were rendered and the owners agreed to them, but on the useful result thereof (Judgment of the Supreme Court of the Russian Federation No 303-ES14-31 dated 09/10/2014).

The salvage reward is calculated under criteria listed in art 342(1) of the MSC RF and art 13.1 of the Salvage Convention 1989. According to them, the Court of first instance and the Court of Appeal concluded that the salvage reward in the amount of 20% of the vessel’s salved value was justified and reasonable.

Upholding the cassation appeal, the Court emphasised that the time used, expenses, and losses incurred by the salvors are the criteria which should be taken into account when determining the salvage reward. Therefore, if the salved value of the vessel or other property is enough to pay the salvage reward, the usual expenses and losses should be included. Special compensation under art 343 of the MSC RF is paid to salvors only in cases where they cannot earn a reward under art 342.

Article 344 of the MSC RF stipulates that the salvage reward should be apportioned between the salvors who participated in the salvage operation under the criteria established by art 324(1) of the MSC RF and art 13.1 of the Salvage Convention 1989. The evidence provided demonstrates that at least three other vessels in addition to the salvor's vessel, Merkuriy, participated in the salvage operation: the Mitridat, the Victor Lyagin, and the Nikolay Dmitriyev. The Court of first instance and the Court of Appeal failed to consider the fact that these other parties participated in the salvage operation and had a claim to a reward. The Courts also did not establish the extent to which these other parties contributed to the useful result.

Another ground to revise the judgments was that the Courts did not check the correctness of the services reflected in the salvor's calculation under the SCOPIC clause, and did not assess the mistakes in the documentation (eg, in the agreement on the reward, in the Russian version of the text the amount was indicated as USD 500,000 but in the English version it was USD 314,696). The Court of Cassation emphasised that under the provisions of the MSC RF and the Salvage Convention 1989, the Court should assess all the factual circumstances around salvage according to the criteria stipulated.